
226 Operational Risk Control
insurance company may expect substantial fluctuations in the annual costs of insured
events. Actuarial methods must be developed to deal with this probability.
In connection to coverage of operational risks, solutions must also be found to deal
with unearned premium provisions. Most jurisdictions require insurance companies
to reimburse policyholders if the policy is terminated before the end of the period for
which premiums have been paid. Usually, the amount to be refunded is the pro-rata
portion of the full premium, but sometimes this amount is reduced to account for
expense incurred by the insurance company and its agents. ...